Despite 2020 Earnings Dip, EHR Vendor Cerner Optimistic for 2021

EHR vendor Cerner announced a full-year 3 percent revenue decrease in 2020 compared to the previous year.

2020 full-year revenue checked in at $5.506 billion and revenue reflected approximately 1 percent growth over 2019 after adjusting for divestitures, which showed the impact of COVID-19.

According to Cerner, revenue primarily declined due to COVID-19 and the departure of its revenue cycle management outsourcing services in June 2020.

"I'm pleased with Cerner's execution and commitment to supporting our clients in a challenging environment,” said Brent Shafer, Cerner chairman and CEO. “Despite these challenges, Cerner delivered on financial goals, continued to make operational improvements, and further refined our growth strategies. As a result of our progress in 2020, we enter 2021 well-positioned to deliver increased value to our clients while also driving profitable growth for shareholders."

The vendor hit its revised bookings expectation, totaling $5.585 billion compared to 2019 bookings of $5.990. billion. Cerner said this specific decline was a result of the divestitures and the pandemic.

The company’s US Generally Accepted Accounting Principles (GAAP) Operating Margin of 16.6 percent exceeded its 10.6 percent mark in 2019. Its Adjusted Operating Margin (non-GAAP) was also higher at 19.9 percent, compared to 18.5 percent in 2019.

Looking at the company’s fourth quarter, its revenue was down 3 percent from $1.44 billion in 2019 Q4 to $1.39 billion in 2020 Q4. Excluding divestitures, Cerner said its 2019 Q4 would have been roughly 1 percent, which was another example of the COVID-19 impact.

"Cerner's fourth quarter results reflect a very solid finish to the year," Shafer continued.

Bookings also hit the vendor’s expectations, totaling $1.683 billion. This total exceeded its prior booking total of $1.47 billion in Q3.

Cerner noted its GAAP cash flow hit $513 million in Q4.

The company also reported a total backlog of $13.04 billion, exceeding last quarter’s $13.01 billion total backlog.

Fourth-quarter day sales hit outstanding on 76 days, down from 81 days in the 2020 third quarter.

Looking forward, Cerner expects continued growth of project and sales, but there is still uncertainty regarding the impact and longevity of COVID-19.

Cerner said these optimistic expectations come with a higher risk and uncertainty than usual, but the vendor projects 2021 Q1 revenue between $1.370 billion and $1.420 billion. It also expects 2021 Q1 new business bookings between $1.150 billion and $1.350 billion.

The vendor said it expects its full 2021 revenue to be between $5.750 billion and $5.950 billion.

For nearly two years, Cerner has focused on developing a category-defining data business and as the company continues to attack that sector, the EHR vendor executives said they are striving towards building a $1 billion data business.

With Cerner EHRs implemented in one-third of US hospitals, the vendor said it can bring compelling points of differentiation when it comes to a data-based strategy.

“We think that the profile of our client base is particularly differentiated, including the fact that we have a high density of community hospitals and health systems that don't traditionally have an opportunity to participate in clinical trial activity,” Donald Trigg, president of Cerner, said at the 39th Annual J.P. Morgan Healthcare Conference in January.

“Then we have multi-decades of experience really dealing with the complexities of health care data from a master data management perspective as well as the tech enablement strategies required to leverage those insights within the provider health system.”

Trigg and Marc Naughton, executive vice president and CFO of the company, pointed at its December 2020 acquisition of Kantar Health, for $375 million, in an attempt to advance clinical trials.

Cerner and Kantar Health expect to enable a two-way collaboration between providers and the pharmaceutical industry, aiming to allow researchers to address complex clinical questions with real-world evidence.